Key to retailing: manage your spending – June 5, 2006

June 5, 2006

Impulse buying may be something the powersports industry would like to see more of on the consumers’ parts, but an industry veteran warns dealers of such costly buying practices.
Scott Link, Alpinestars’ North American sales manager, sees impulse buying as a serious problem for the industry. It happens like this: a dealer sees a big sale on a new line of sport jackets and makes the impulse buy. But the jackets have a similar price point and features as other lines that the dealer already carries. The result is an inventory that has a number of brands, but no depth in size or color selection.
Link, who has been in the industry for nearly 30 years, has seen this scenario result in slow sales and the resulting inability of dealers to turn their inventory in a timely and profitable manner. He suggests another buying tact that calls for more aggressive planning and inventory management.
First, dealers should consider how many inventory turns they’ll shoot for in a 12-month span. Then, they should determine sales forecasts for every product category, getting as detailed, for example, as figuring out sales numbers on different jacket styles, pants, gloves, helmets, etc. This process will determine how much working inventory the dealer should maintain over the next year. For example, a dealer forecasts making $500,000 in jackets over three turns in a 12-month span. By doing this, the dealer estimates it will cost $300,000 to purchase those jackets. Divide the $300,000 into three turns and you have your working inventory budget: $100,000 per turn. The key, Link said, is dealers need to remember that the $100,000 needs to cover the entire lineup of varying jacket styles.
“What happens is when dealers continue to boil (the sale of varying jacket styles and sizes) down, they’ll realize that they can’t jump around and have a little bit of this and a little bit of that,” Link said. “They really need to commit to one or two brands to offer their consumers selection.”
Next, dealers need to identify a transition plan. A plan that would introduce new product and potentially get rid of dated product.
To do that, Link suggests the following: If it’s a spring line, evaluate sales at a point during the busy season. If the product is not selling to your forecast, consider remerchandising the product or providing more training to the sales staff on that particular line. If the sales are still slow, decide in the fall whether to continue to carry it or eventually drop the product. If this discussion is held in the fall, then the dealer has several months to slowly close out the product, by not reordering the less common sizes and using discounts and sales promotions to move the leftovers.